diff --git a/tools/gulp/tasks/unit-test.ts b/tools/gulp/tasks/unit-test.ts
index dda92efb825c..8ae722d180de 100644
--- a/tools/gulp/tasks/unit-test.ts
+++ b/tools/gulp/tasks/unit-test.ts
@@ -75,13 +75,16 @@ gulp.task('test', [':test:deps'], () => {
   });
 
   // Refreshes Karma's file list and schedules a test run.
-  let runTests = () => {
-    server.refreshFiles().then(() => server._injector.get('executor').schedule());
+  // Tests will only run if TypeScript compilation was successful.
+  let runTests = (err?: Error) => {
+    if (!err) {
+      server.refreshFiles().then(() => server._injector.get('executor').schedule());
+    }
   };
 
   // Boot up the test server and run the tests whenever a new browser connects.
   server.start();
-  server.on('browser_register', runTests);
+  server.on('browser_register', () => runTests());
 
   // Watch for file changes, rebuild and run the tests.
   gulp.watch(patternRoot + '.ts', () => runSequence(':build:components:ts:spec', runTests));
diff --git a/tools/gulp/util/task_helpers.ts b/tools/gulp/util/task_helpers.ts
index 8913ef2a44be..377d5ff77781 100644
--- a/tools/gulp/util/task_helpers.ts
+++ b/tools/gulp/util/task_helpers.ts
@@ -35,9 +35,7 @@ function _globify(maybeGlob: string, suffix = '**/*') {
 
 /** Creates a task that runs the TypeScript compiler */
 export function tsBuildTask(tsConfigPath: string, extraOptions?: CompilerOptions) {
-  return () => {
-    compileProject(tsConfigPath, extraOptions);
-  };
+  return () => compileProject(tsConfigPath, extraOptions);
 }
 
 
diff --git a/tools/gulp/util/ts-compiler.ts b/tools/gulp/util/ts-compiler.ts
index 6045b7aee64b..ab1890066c32 100644
--- a/tools/gulp/util/ts-compiler.ts
+++ b/tools/gulp/util/ts-compiler.ts
@@ -6,13 +6,14 @@ import * as chalk from 'chalk';
 export function compileProject(project: string, options: ts.CompilerOptions) {
   let parsed = parseProjectConfig(project, options);
   let program = ts.createProgram(parsed.fileNames, parsed.options);
+  let baseDir = program.getCurrentDirectory();
 
   // Report any invalid TypeScript options for the project.
-  checkDiagnostics(program.getOptionsDiagnostics());
+  reportDiagnostics(program.getOptionsDiagnostics(), baseDir);
 
   let emitResult = program.emit();
 
-  checkDiagnostics(emitResult.diagnostics);
+  reportDiagnostics(emitResult.diagnostics, baseDir);
 }
 
 /** Parses a TypeScript project configuration. */
@@ -31,26 +32,26 @@ function parseProjectConfig(project: string, options: ts.CompilerOptions) {
 }
 
 /** Formats the TypeScript diagnostics into a error string. */
-export function formatDiagnostics(diagnostics: ts.Diagnostic[]): string {
+export function formatDiagnostics(diagnostics: ts.Diagnostic[], baseDir: string): string {
   return diagnostics.map(diagnostic => {
-    let res = ts.DiagnosticCategory[diagnostic.category];
+    let res = `• ${chalk.red(`TS${diagnostic.code}`)} - `;
 
     if (diagnostic.file) {
       let {line, character} = diagnostic.file.getLineAndCharacterOfPosition(diagnostic.start);
+      let filePath = path.relative(baseDir, diagnostic.file.fileName);
 
-      res += ` at ${diagnostic.file.fileName}(${line + 1},${character + 1}):`;
+      res += `${filePath}(${line + 1},${character + 1}): `;
     }
-    res += ` ${ts.flattenDiagnosticMessageText(diagnostic.messageText, '\n')}`;
+    res += `${ts.flattenDiagnosticMessageText(diagnostic.messageText, '\n')}`;
 
     return res;
   }).join('\n');
 }
 
-/** Checks diagnostics and throws errors if present. */
-export function checkDiagnostics(diagnostics: ts.Diagnostic[]) {
+/** Checks and reports diagnostics if present. */
+export function reportDiagnostics(diagnostics: ts.Diagnostic[], baseDir?: string) {
   if (diagnostics && diagnostics.length && diagnostics[0]) {
-    console.error(formatDiagnostics(diagnostics));
-    console.error(chalk.red('TypeScript compilation failed. Exiting process.'));
-    process.exit(1);
+    console.error(formatDiagnostics(diagnostics, baseDir));
+    throw new Error('TypeScript compilation failed.');
   }
 }